Policies, Standards and Guidelines Governing the Sale, Merger or Consolidation of Private Higher Education Institutions in the Philippines

July 20, 2016

CHED MEMORANDUM ORDER NO. 041-15

 

In accordance with the pertinent provisions of Section 2, Article XIV of the 1987 Constitution, Section 8 (paragraphs d and n) of Republic Act (RA) No. 7722 otherwise known as the "Higher Education Act of 1994", pursuant to the Commission en-banc (CEB) Resolution No. 526, Series of 2013, and in consonance with Section 107, Chapter 1, Title XIII of Batas Pambansa Blg. 68 otherwise known as the "Corporation Code of the Philippines", the Commission hereby issues the Policies, Standards and Guidelines (PSGs) Governing the Sale, Merger or Consolidation of Private Higher Education Institutions (PHEIs) in the Philippines.

ARTICLE I

Rationale

Today, the Philippine higher education landscape can be characterized as being dominated by a growing private higher education sub-sector with diverse types of classification such as stock, non-stock, sectarian and non-sectarian, among others. With the rapid population growth every year, the number of private higher education institutions (PHEIs) could increase and may impact negatively the quality of higher education services and products in the long run. The pressures on financial viability of HEIs owing to various developments including the impending implementation of the K to 12 program, the shift to outcomes-based education, stiffer internal and external competition due to globalization as well as the aggressive and continuing thrust of the CHED towards higher levels of quality, has become more intense and many private HEIs may no longer continue operations or simply open themselves to acquisition and possibly, mergers and other forms of corporate combinations.

Thus, to address this emerging scenario and in order to carry out its mandate to strengthen the quality profile of every HEI and the entire higher education sector, the Commission is instituting a mechanism or procedure that will govern the acquisition or sale, merger or consolidation of higher education in the country to ensure that the desired quality output/outcome of the higher education system is achieved, safeguarded and maintained. EcTCAD

With the resulting sale, merger or consolidation under the present guidelines, it is hoped that there will be stronger and better quality PHEIs. The infusion of much needed investment and capital to HEIs certainly will be an impetus towards the attainment of greater quality.

On another plane, the coming of ASEAN integration intends to establish the region as a single market and production base, turning diversity into economic opportunities for complementation to make ASEAN a more dynamic and stronger segment of the global supply chain. Needless to say, this poses a major challenge to Philippine higher education institutions to redefine their competitive advantages, build-up world-class facilities, classrooms, and laboratories, and acquire new learning approaches through faculty exchanges, researches, extensions and innovation. In a competitive and even tight investment and capital market, the acquisition, mergers and other corporate combinations may be a viable mechanism to access the needed funding and resources critical in strengthening the Philippine position as an education and training hub in the advent of ASEAN integration.

Hence, this Policies, Standards and Guidelines on Sale, Merger or Consolidation of in the Philippines is hereby formulated.

ARTICLE II

Objective

This set of PSGs generally seeks to rationalize, organize and properly implement the fundamental processes and procedures governing the sale, mergers or consolidation of PHEIs expected to significantly strengthen and improve the Philippine higher education sector and make it responsive to national and international developments. Specifically, the CMO is formulated in order to attain the following:

A) To strengthen the higher education sector through the operation of stronger, more viable, and better quality HEIs delivering better learning outcomes vital in producing globally competitive graduates;

B) To promote economy and efficiency in the operation of the administrative and academic components of higher educational institutions in support of the ongoing educational reforms that include RA 10533 otherwise known as the "Enhanced Basic Education Act of 2013" or K to 12 program, alignment of Philippine higher education programs with the ASEAN Reference Qualifications Framework, meaningful participation to the integration process of the ASEAN Economic Community (AEC) or ASEAN Integration as well as the Trans-Pacific Partnership Trade Agreement;

C) To provide the policy environment for reforms towards the streamlining of the higher education sector for greater quality, productivity, stability, efficiency and competitiveness as well as the development of globally comparable universities and colleges; and

D) To provide the mechanism for access to capital, funding and investments to PHEIs to upgrade its facilities and programs for quality education while sustaining its economic viability and financial sustainability in the management of school operations.

ARTICLE III

General Policy

SECTION 1. On Sale. —

As a general policy, the sale of higher educational institutions (HEIs) shall require the endorsement and/or approval of the Commission on Higher education in accordance with the policies, standards and guidelines herein set forth. It shall also be in accordance with other pertinent or applicable laws.

SECTION 2. On Mergers or Consolidation. —

As a general policy, the merger or consolidations of higher education institutions (HEIs) shall require endorsement and/or approval of the Commission on Higher Education and the Securities and Exchange Commission. The merger or consolidation shall be in accordance with the applicable rules under the Corporation Code, the Competition Policy and other pertinent or applicable laws, rules and regulations.

SECTION 3. All private HEIs including their campuses and branches are covered under this CHED Memorandum Order. Likewise, foreign HEIs or education service providers operating in the Philippines shall also be covered by these rules and regulations.

ARTICLE IV

Object, Types and Components of Sale and Merger

SECTION 1. Object of Sale Merger or Consolidation. —

The sale/transfer, merger or acquisition contemplated under these rules refers to the entirety of the HEI as a corporation, provided that specific components of the HEIs' assets and/or liabilities may be specified or included in the said sale/transfer, merger or acquisition; provided further that only in cases where, the sale/transfer of assets of the school involves all or substantially all of the property or assets necessary or required for the operation of the school of a non-stock corporation, or at least a majority of the shares of stocks in case of stock corporations, except in the case of foreign investors where the constitutional limitation of not more than 40% shall apply, shall the government permits or recognitions and other status or similar conditions be acquired by or transferred to the buyer, or in the case of merger, the absorbing entity or the new entity, as the case may be, subject to the evaluation and approval by the Commission to ensure quality education and that the purposes of this Order are attained and complied with. HSAcaE

Section 1.1 Total Sale: Totality of the HEI. —

In the case of the totality of the HEI, the sale, merger or consolidation shall cover the school corporation, its tangible and intangible assets as well as liabilities directly or indirectly under its corporate name or other assets for which it is the beneficial owner thereof.

Section 1.2 Partial Sale: Component or Asset of the HEI. —

In the case of partial sale, merger or consolidation, either the school alone as a corporate entity is the object of the transaction or other tangible assets such as real property, intangible assets like shares of stocks or similar assets; or a part of the operation of the school. In such a case, the acquisition or transfer of the permits or recognition and other status or similar status to the buyer or transferee shall be subject to appropriate stipulations and further approval by the Commission on Higher Education.

SECTION 2. Types of Corporate Mergers, Consolidation and Acquisitions. —

Section 2.1 Between or Among Stock HEIs. —

In this category, the merger of the HEIs involving shares of stocks and other assets either total or partial may be undertaken by the concerned HEI or concerned parties, provided, however, that the various requirements provided for by the Corporation Code, including but not limited, to tax and labor laws, are complied with.

Section 2.2 Between or Among Non-stock, Non-profit HEIs. —

In this category, the merger of the HEIs does not involve shares of stocks but a change of membership of the Board of Trustees or the takeover of the total management in the concept of owner. Likewise, the school and other assets either total or partial may be undertaken by the concerned parties, provided, however, that the various requirements provided for by the Corporation Code, including but not limited, to tax and labor laws, are complied with.

Section 2.3 Involving Non-stock/Non-Profit and Stock/Profit HEIs. —

This category may involve a change of membership of the Board whether total or partial. The takeover of the total management is likewise done. The merger of the HEIs may involve conversion of shares of stocks and other assets either total or partial, provided, however, that the transaction is in accordance with various requirements provided for by law, especially the Corporation Code; and provided, further that relevant provisions of tax and labor laws are complied with.

In this category, however, a major consideration should be the opportunity for non-stock, non-profit HEIs to access funding and investments from stock/profit HEIs in order to enhance quality and viability. Thus, the surviving entity should be the viable and dominant entity that can provide the impetus towards greater viability and enhanced quality.

Section 2.4 Involving Philippine HEIs and Foreign HEIs. —

In this category, a Philippine HEI is either acquired totally or partially as a standalone sale or merged with a foreign HEI or education service provider. This either could result in the change of membership of the Board of the Philippine HEI. In the case of the merger or consolidation of the HEIs, this will involve conversion of shares, of stocks and other assets either total or partial, provided, however, that the various requirements provided for by the 1987 Philippine Constitution involving the sale or acquisition of and management of educational corporations (Article 14, 1987 Constitution) and other laws, including but not limited, to tax and labor laws, are complied with; and provided further that at least a better quality of higher education delivery shall be attained and maintained.

Section 2.5 Involving Philippine HEIs and Non-HEIs. —

In this category, a Philippine HEI is acquired either totally or partially by a non-HEI. The non-HEI may acquire the Philippine HEI through the purchase of its shares of stock if it is a stock corporation, or of its assets if it is a non-stock corporation. Whether the sale is total or partial, the acquiring non-HEI shall ensure that the various requirements provided for by the 1987 Philippine Constitution involving the acquisition and management of educational corporations (Article 14, 1987 Constitution) and other laws, including but not limited to, tax and labor laws are complied with; provided further that the quality of education shall be maintained or enhanced. AcICHD

ARTICLE V

Definition of Terms

For purposes of these PSGs, the following terms are hereby defined as follows:

A. ASEAN Economic Cooperation (AEC) 2015. This is defined as a single regional common market of ASEAN countries starting 2015. The regional integration's objective is to create a competitive market of over 600 million people in ASEAN countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. There will be free flow of goods, services, investment capital and skilled labor following the liberalization. These will include tariff reductions and streamlining of certain administrative procedures. Many businesses have begun preparing themselves three years ahead of time to meet the challenges and opportunities of the AEC.

B. Assignment of Rights/Interest. This means the transfer of a property right or title to some particular person under an agreement, usually in writing. Unless an assignment is qualified in some way, it is generally considered to be a transfer of the transferor's entire interest in the estate, chattel, or other thing assigned. An assignment is usually limited to the transfer of intangible rights, including contractual rights, choses in action and rights in or connected with property.

C. Buyer. Also referred to as the Vendee, and refers to the purchaser of a higher education institution or an interest therein.

D. Consideration. This refers to any benefit conferred, or agreed to be conferred, or the price of the higher education institution or an interest therein that is intended to be transferred by the buyer to the seller.

E. Consolidated School. This refers to the new higher education institution created after dissolution of the constituent educational corporations.

F. Consolidation. This refers to a union of two or more, existing higher educational institutions to form a single new educational corporation called the consolidated school. Said new entity shall have the combined rights, privileges, franchises, powers, assets and liabilities of the constituent corporations, which are deemed dissolved.

G. Constituent Schools. This refers to the higher educational institutions which are parties to merger or consolidation. In the case of merger, they are the absorbed and absorbing corporations while in the case of consolidation, they are the two or more corporations desiring to unite into a single, new educational corporation.

H. Intangible Asset. This refers to non-physical assets having a useful life of greater than one year. For purposes of this Order, in higher education institutions, this may include, but not limited to, permits, recognition, accreditation, other similar privileges and entitlements.

I. Merger. This refers to the union of two or more existing higher educational corporations, whereby the surviving educational corporation retains its identity and absorbs one or more constituent educational corporation/s, and takes over the rights, privileges, franchises, powers, assets and liabilities of the absorbed corporation/s. The absorbed corporation/s is/are deemed dissolved.

J. Sale. This refers to a contract whereby one of the contracting parties is obligated to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. (Art. 1458, NCC). This is essentially an acquisition or the purchase of one HEI by another entity (either an HEI or a non-HEI) in which no new company is formed. The term sale shall also cover transactions such as the transfer or assignment of rights/interests, or similar modes, among others.

K. Seller. This is also referred to as the Vendor and refers to the educational institution which transfers property by sale to the buyer or an interest or right therein. The seller generally negotiates the sale and becomes the recipient of the consideration.

L. Surviving School. Refers to the higher educational institution which survives and continue the operations of the combined institutions in the case of merger.

M. Tangible Asset. This refers to assets in physical form such as buildings and land, equipment, facilities, machinery, and current assets like inventory of stocks or goods. TAIaHE

ARTICLE VI

Guidelines and Procedures

SECTION 1. On Sale, the Following Procedures shall Apply. —

Section 1.1 Information of Intent and Approval by CHED. —

For a contemplated sale, the Buyer or the appropriate representative shall inform the CHED of its intent to purchase a particular HEI or any interest therein within 30 days before the Buyer has firmed up preliminary plans to negotiate acquisition of the said HEI.

Within 15 days, the CHED shall communicate its action on the Letter of Intent of the Buyer and attaching in its decision any information that may be deemed relevant on the HEI which is the subject of the sale to the concerned parties.

Section 1.2 Information of the Result of the Negotiations by Buyer. —

In any event, it shall be the duty of the Buyer or the authorized representative to communicate to the CHED the results of their final negotiations with the HEI subject of sale within 15 days. In the case of a successful and/or consummated sale, the Buyer shall fully disclose in writing, within fifteen (15) days to the CHED the identities of the buyers/parties in interests, new owners or shareholders.

Section 1.3 Action of the Commission. —

Upon notification of the CHED of the change of ownership of the HEI subject of sale, the new owners may immediately apply for the confirmation of permits, recognitions, and other status or entitlements.

The CHED, after determining compliance with the provisions of this CMO and other applicable PSGs, laws, rules and regulations, and once the registration requirements are complied with, the Commission within thirty (30) days shall confirm and issue the Certificate of Confirmation of permits, recognition of programs, or institutional status subject to compliance with the relevant Policies Standards and Guidelines and such action shall be the basis for the operation of the programs and the typology of said HEI pursuant to CMO 46 series 2012.

This confirmation shall also cover other entitlements of the HEIs including but not limited to accreditation levels, and other status conferred and/or already being enjoyed by said HEI.

Section 1.4 Full Disclosures in Writing of the Buyers/Parties in Interests, New Owners or Shareholders Involved in the Sale, Transfer/Assignment of Right/Interests of the Private Higher Education Institution. —

To reiterate, in view of the Constitutional protection accorded to educational institutions and as special corporations regulated under the Corporation Code of the Philippines, and considering the public interest and national security dimensions of educational corporations in the Philippine setting, in the event that there is a change in ownership of the higher education institution either through sale of, transfer/assignment of rights/interests or ownership, or similar modes, it shall be the duty of the Chairman of the Board of Trustees/Directors of the private higher education institution to fully disclose in writing, within fifteen (15) days, to the Commission on Higher Education Commission the change in ownership specifying the identities of the nevi owners or shareholders and other pertinent information.

Section 1.5 Transfer of Permits, Recognition and Other Status or Condition Due to the Sale, Merger or Acquisition. —

The Commission thru its appropriate offices and officials, within thirty (30) days, shall confirm the permits, recognition, status (i.e., university status, etc.) or similar conditions of the HEI subject of sale or merger effected either through the sale/transfer or acquisition of assets in the case of non-stock corporation, or of shares of stock in the case of stock corporations, or through any of the mergers or consolidation contemplated herein, if compliant under this CMO provided that the sale or merger shall result to better quality education. The letter of confirmation shall also cover other entitlements of the HEIs including but not limited to accreditation levels, and other status conferred and/or already being enjoyed by said HEI. cDHAES

SECTION 2. Mergers or Consolidation. — In the case of mergers or consolidations, the following conditions and procedures shall apply:

Section 2.1 Appropriate Parties shall Seek Approval. —

For a contemplated sale, transfer/assignment of rights/interests, the buyer shall inform the board or the appropriate authority the Commission of the intent.

2.1.1 Initiation Phase

A. Articles of merger or consolidation embodying the following:

1) Plan of Merger or Consolidation;

2) The Number of Shares Outstanding in case of Stock Corporations, or of Members, in case of Non-Stock corporations; and

3) As to Each Corporation, the Number of Shares Outstanding or Members Voting for and the Names of Stockholders or Members Voting Against such Plan, respectively.

B. Plan of merger or consolidation setting forth the following:

1) The names of the schools proposing to merge or consolidate, hereinafter referred to as the constituent schools;

2) The terms of the merger or consolidation and the mode of carrying the same into effect;

3) A statement of the changes, if any, in the articles of incorporation of the surviving school in case of merger; and, with respect to the consolidated school in case of consolidation, all the statements required to be set forth in the articles of incorporation for corporations organized under the Corporation Code; and

4) Such other provisions with respect to the proposed merger or consolidation as are deemed necessary or desirable.

C. Approval of the Plan to Merge or Consolidate

1) Approval of the plan of merger or consolidation by majority of the Board of Directors of Trustees having a quorum in a meeting duly called for such purpose; and

2) Approval of the plan of merger or consolidation by at least 2/3 of the outstanding VOTING capital stock in a stock corporation or at least 2/3 of the members in case of non-stock educational corporations.

Section 2.2 Action of the Commission on Higher Education. —

Upon compliance with the provisions of this CMO and other applicable laws, rules and regulations, and once the registration requirements are complied with, the Commission within thirty (30) days shall confirm and issue the certificate of confirmation of permits, recognition of programs, or institutional status subject to compliance with the relevant Policies Standards and Guidelines, and such action shall be the basis for the operation of the programs and typology, pursuant to CMO 46 series 2012, of the surviving entity or the new entity created. This confirmation shall also cover other entitlements of the HEIs including but not limited to accreditation levels, and other status conferred and/or already being enjoyed by said HEI to the surviving HEI or corporation or to the new entity as the case may be.

In case application is denied, motion for reconsideration/appeal may be filed by the party to the Commission En Banc within 15 days from receipt of the denial.

Section 2.3 Full Disclosure in Writing of the Buyers/Parties in Interests, New Owners or Shareholders involved in the Merger or Consolidation of the Private Higher Education Institution. —

Likewise, in view of the Constitutional protection accorded to educational institutions and as special corporations regulated under the Corporation Code of the Philippines, and considering the public interest and national security dimensions of educational corporations in the Philippine setting, in the event that there is a change in ownership of the higher education institution either through sale of, transfer/assignment of rights/interests or ownership, or similar modes, it shall be the duty of the Chairman of the Board of Trustees/Regents/Governing Board of the private higher education institution to fully disclose in writing, within thirty (30) days, to the Commission on Higher Education Commission the identities of the buyers/parties in interests, new owners or shareholders. ASEcHI

Section 2.4 Transfer of Permits, Recognitions, and Other Status or Condition Due to the Merger. —

The Commission thru its appropriate offices and officials, within thirty (30) days, shall confirm the permits, recognition, status (i.e., university status, etc.) or similar conditions of the HEI subject of merger, if compliant under this CMO provided that the merger shall result to better quality education. The letter of confirmation shall also cover other entitlements of the HEIs including but not limited to accreditation levels, and other status conferred and/or already being enjoyed by said HEI.

Section 2.5 Approval of the Securities and Exchange Commission.—

Articles of Merger or Consolidation

After the lapse of the period to file an objection/opposition and no opposition/objection has been filed or after all objection/oppositions have been resolved, the constituent Schools must file with the Securities and Exchange Commission (SEC) the Plan of Merger or Consolidation and the Articles of Merger or Consolidation, together with the other supporting documents required by the Corporation Code of the Philippines and SEC rules and regulations can file with this Commission the Articles of Merger or Consolidation. These Articles shall be signed by the president and certified by the secretary of each school and shall contain the following:

a. The plan of the merger or the plan of consolidation;

b. As to stock schools, the number of shares outstanding, or in the case of non-stock schools, the number of members; and

c. As to each school, the number of shares or members voting for and against such plan, respectively.

The SEC shall approve the articles of merger/consolidation and issue the corresponding Certificate of Filing of Articles of Merger/Consolidation if it is satisfied that the merger or consolidation of the corporations concerned is not inconsistent with the provisions of the Corporation Code, existing laws and SEC rules and regulations.

The merger or consolidation shall be effective upon the issuance by the SEC of the necessary Certificate of Merger or of Consolidation, as the case may be.

The SEC shall inform the Bureau of Internal Revenue (BIR) of the approval of the Merger/Consolidation.

Section 2.6 Publication of the Proposed Merger or Consolidation. —

a. The proposal to merge or consolidate the schools shall be posted in at least three (3) conspicuous places in their respective areas of operation;

b. The proposal shall also be published in a newspaper of general circulation once a week for three consecutive weeks;

c. Notice of the proposal to merge or consolidate the schools shall be sent to all creditors of the constituent schools.

ARTICLE VII

Effect of Sale

The sale or the transfer/assignment of rights/interests shall have the following effects:

A. The ownership of the educational institution shall be transferred to the Buyer upon the fulfillment of all the conditions the set forth under Article VI, Section 1 of this guidelines. However, in the case of the sale involving the operation of the school corporation or at least a majority of the shares of stocks, except in the case of foreign investors where the constitutional limitation of not more than 40% shall apply, the government permits or recognitions and other status or similar conditions shall be acquired by or transferred to the buyer subject to the evaluation and approval by the Commission to ensure quality education and that the purposes of this Order are attained and complied with;

B. The Buyer shall possess all the rights, privileges, immunities, franchises, and powers and shall be subject to all the duties and liabilities of the HEI except as may be otherwise provided in accordance with law. These shall include but not limited to the permit and/or recognition of programs or accreditation to any and/all courses or programs issued and/or granted by the CHED; and all property, real or personal, and all receivables due on whatever account, including subscriptions to shares and other choses in action, and all and every other interest of, or belonging to, or due to the HEI (Seller), shall be deemed transferred to and vested in the BUYER without further act or deed;

C. The Seller higher education institution in view of a sale shall remain obligated to: (1) furnish the necessary transfer credentials and records to students affected by the sale, merger or consolidation; and (2) cause the preservation of all the students' academic records by submitting the same to the surviving HEI, CHED Regional Office and the National Archives Office; ITAaHc

D. The Seller higher education institution shall assist and facilitate the immediate transfer of the students affected by the sale, and provided further, that the Commission shall be duly informed of the intent of transfer before the sale takes effect, and

E. The Buyer shall be responsible and liable for all the liabilities and obligations incurred by the Seller higher education institution, unless otherwise stated or limited in their contract of sale.

ARTICLE VIII

Effect of Merger or Consolidation

The merger or consolidation shall have the following effects:

A. The constituent schools shall become a single school which, in case of merger, shall be the surviving school designated in the plan of merger; and, in case of consolidation, shall be the consolidated school designated in the plan of consolidation;

B. The separate existence of the constituent schools shall cease, except that of the surviving or the consolidated school;

C. The surviving or the consolidated school shall possess all the rights, privileges, immunities and powers and shall be subject to all the duties and liabilities of a school organized under the Corporation Code;

D. The surviving or the consolidated school shall thereupon and thereafter possess all the rights, privileges, immunities and franchises of each of the constituent schools, including, but not limited to, the permit and/or recognition or accreditation to any and/all courses of study in the tertiary or post graduate level issued and/or granted by the Commission to each of the constituent schools; and all property, real or personal, and all receivables due on whatever account, including subscriptions to shares and other choses in action, and all and every other interest of, or belonging to, or due to each constituent school, shall be deemed transferred to and vested in such surviving or consolidated school without further act or deed;

E. The higher education institution in view of a sale, merger or consolidated shall remain obligated to: (1) furnish the necessary transfer credentials and records to students affected by the sale, merger or consolidation; and (2) cause the preservation of all the students' academic records by submitting the same to the surviving HEI, CHED Regional Office and the National Archives Office;

F. The selling higher education institution shall assist and facilitate the immediate transfer of the students affected by the sale, merger or consolidation, and provided further, that the Commission shall be duly informed of the intent of transfer before the sale, merger or consolidation takes effect, and

G. The surviving or consolidated school shall be responsible and liable for all the liabilities and obligations of each of the constituent schools in the same manner as if such surviving or consolidated school had itself incurred such liabilities or obligations; and any pending claim, action or proceeding brought by or against any of such constituent schools may be prosecuted by or against the surviving or consolidated school. The rights of creditors or liens upon the property of any of such constituent schools shall not be impaired by such merger or consolidation.

ARTICLE IX

Effect on Labor

Every private higher education institution subject of the sale, merger and consolidation shall promote the improvement of the economic, social and professional status of all its personnel.

In recognition of their special employment status and their special role in the promotion of education, the employment of the academic and the academic support personnel, or the teaching and non-teaching academic personnel, shall be governed by the policies and rules of the Commission, promulgated from the time to time, in coordination with the Department of Education (DepEd), the Technical Education and Skills Development Authority (TESDA), and the Department of Labor and Employment (DOLE).

Conditions of employment of non-academic and other personnel of the institution, including compensation, hours of work, security of tenure and labor relations, shall be governed by appropriate labor laws, regulations; and jurisprudence and by institutional policies, rules and regulations.

ARTICLE X

Effect of the Competition Law

The Competition Law is intended to ensure efficient market competition and to level the playing field among businesses engaged in trade, industry, and all commercial economic activities.

In relation to this, the sale or merger of higher education institutions shall follow pertinent rules and regulations provided for under the Philippine Competition Law and Republic Act 10667 or "An Act providing for a National Competition Policy, Anti-Competitive Agreements, Abuse of Dominant Position and Anti-Competitive Mergers and Acquisitions, Establishing the Philippine Competition Commission and Appropriating Funds Therefor," thus shall have direct and suppletory effect on the implementation of the Policies, Standards and Guidelines on Sale, Merger or Consolidation of Private Higher Education Institutions. CHTAIc

In the case of the merger or consolidation of educational institutions, a favorable or no-objection ruling by the Philippine Competition Commission shall not be construed as dispensing of the requirement for a favorable recommendation by the Commission on Higher Education.

ARTICLE XI

Review

The policies, standards and guidelines contained herein and the constituent school's/s compliance therewith shall be reviewed every three (3) years from the grant of this Commission's Confirmation or earlier as may be directed by the Commission as when warranted by exigent circumstances.

ARTICLE XII

Creation of Inter-Agency Task Force on Sale, Merger and Acquisition

In order to implement the purposes and objectives efficiently and effectively, an inter-agency is hereby created.

SECTION 1. The Task Force shall be composed of the Commission on Higher Education as the lead agency particularly: (1) Office of the Executive Director — head, (2) Office of Programs and Standards Development, (3) Legal and Legislative Service, and (4) Office for Planning, Research and Knowledge Management, and with the following agencies:

(1) Securities and Exchange Commission (SEC)

(2) Department of Justice (DOJ)

(3) Department of Labor and Employment (DOLE)

(4) Office for Competition — DOJ

SECTION 2. The Task Force shall exercise oversight responsibility and have the following functions:

2.1 Evaluate documents and applications involving sale, merger and consolidation of parties;

2.2 Review proposed mergers and consolidations;

2.3 Monitor and undertake consultation with affected;

2.4 Develop relevant policies, standards and guidelines, if needed;

2.5 Conduct meetings and dialogues as deemed necessary with the different inter-agencies and stakeholders in higher education;

2.6 Shall convene meetings, conferences, and hearings, and require the attendance of parties;

2.7 Conduct ocular/validation visits, investigations, and recommend to the Commission for any appropriate action as may be deemed proper;

2.8 Conduct administrative proceedings, impose sanctions, fines or penalties for any noncompliance with or breach of this CMO and its implementing rules and regulations (IRR) and punish for contempt; and

2.9 Perform other tasks as may be deemed necessary.

ARTICLE XIII

Sanctions

Any HEI found guilty of violating the provisions herein contained shall be subject to the appropriate administrative proceeding including the imposition of sanctions, but not limited to the withdrawal or revocation of authority to operate the program, phase-out of the program, recommendation for the withdrawal of accreditation, and closure of the HEI/program pursuant to Section 8 (e) of Republic Act 7722.

The following are hereby declared punishable acts subject to civil and criminal penalties and administrative sanctions as provided by law:

(1) Failure to fully disclose any information as provided for under this CMO;

(2) Submission of fraudulent documents;

(3) Misrepresentation; and

(4) Any other acts as may be deemed punishable by the task force.

If the institution commits the act, the official responsible for the offense shall be liable, without prejudice to the imposition of any administrative sanction against the higher education institution concerned by the Commission.

In no case shall students be displaced as a result of the sanctions imposed by the Commission. Students affected as a result of the immediate termination of educational programs shall be assisted in transferring to another HEI.

ARTICLE XIV

Revocation of Certification of Permits

The Commission reserves the right to cancel or revoke Certification of Permits of any institution whose records are found to be fraudulent.

ARTICLE XV

Implementing and Interpretative Issuances

The Commission may issue from time to time supplemental and/or interpretative and clarificatory rules and regulations to enhance and make more effective the implementation of this CMO in conjunction with related issuances on the matter.

ARTICLE XVI

Application of the Corporation Code and Other Pertinent Laws

The Corporation Code shall be the statutory basis for mergers and consolidations, and in so far as this CMO does not conflict with the pertinent provisions of the said Code, the CMO shall be primarily applied with the Corporation Code, the New Civil Code and other applicable codes having suppletory effect. Likewise, in cases not covered by this CMO the pertinent provisions of the Corporation Code and other applicable laws shall take precedence. ISHCcT

ARTICLE XVII

Separability Clause

If any part or provision of this CMO is declared invalid or unconstitutional, the other parts or provisions thereof shall remain valid and effective.

ARTICLE XVIII

Repealing Clause

This CHED Memorandum Order specifically modifies Section 55 of the Manual of Regulations for Private Higher Education of 2008 (MORPHE). Other CHED issuances, rules and regulations or parts thereof inconsistent with the provisions of this CMO are deemed repealed, amended or modified accordingly.

ARTICLE XIX

Effectivity

This CHED Memorandum Order shall become effective fifteen (15) days after publication in the Official Gazette or in a newspaper of general circulation until revoked or amended.

Quezon City, Philippines, July 20, 2016.

(SGD.) PATRICIA B. LICUANAN, Ph.D.

Chairperson